Wednesday

Screwing with the Nanny's Taxes...

Received Wednesday, February 6, 2008-Perspective & Opinion
I have a tax question. I worked for Family A for 6 months as a nanny. I now work for Family B. Family A sent me a 1099 which lists me as a independent contractor. Family B had a completed W2 form. I need to know how I should file my taxes, what my recourse is against Family A (who has ignored my phone calls and emails), etc. I had no idea they planned to bill me as an independent contractor (I made more than $10,000) and I have no idea what to do next. Thanks.

36 comments:

jojo bear said...

Why are you not with the family anymore? I would figure my taxes as an employee, the correct way. I would write a note and attach it to the falsified 1099 and say, "I have requested a W4 from my employees and they have not cooperated. I am not at this time, nor have I ever offered my services as an independant contractor."

anonymous1 said...

Yeah, the IRS is especially fond of informants.

accounting student said...

Okay first of all... with a 1099 it could be a blessing in disguise. Under this 1099 you get deductions. Anything that you used for work such as your car miles, car repairs, and some gas can be deducted. the clothes you bought for work. Anything that you have for work including your cell phone bill is a deduction.

With a 1099 you are allowed to take expenses. a W-2 you are not. Don't send a note into the IRS they will think you are stupid, and they don't care.

Your w-2 will be filed letting you take out your fed, state and other taxes. your 1099-misc should just have your income.

Talk it over with a tax guy. You are allowed to file both at the same time. I have filed a 1099 along with a w-2 for many years.

If you have any questions post them and I will reply

OP said...

The original poster here. I'm not with the family any more because they were difficult to work with, did not give me the hours we agreed upon, took vacations without paying me for the time, etc.

I never used my car or gas or cell phone for work, so a 1099 doesn't help me at all in this sense.

Anonymous said...

Just a word of advice on deducting the miles ... you have to be as extremely accurate as possible. Write everything down, collect all your receipts ... (which I'm sure you hadn't thought of doing).
The IRS came down long and hard on a good (honest) friend of mine (after receiving advice from her adviser on what to do) ... and it was a never-ending nightmare.

"The Man" loves to pick on the "little guy" ... i.e., "Independent Contractors".

§marypoppin'pills§ said...

OP
Then yes, they're trying to screw with you. I'd get some advice on what to do. It's not right.
Did you leave on 'not-so-good' terms?
They sound like Class 'A' jerks.

Anonymous said...

If you send a note or anything unusual into the IRS, be prepared for an audit since that is how exceptions or out of the typical range items are dealt with. The plus may be that your employer would be likely to be audited too, but that may apply to your current as well as family A, and they may look at more than this year's taxes if you are selected for an audit. Ask a tax professional and they should be able to give you guidance here.

Anonymous said...

You need to file an SS-8

see http://www.4nannytaxes.com/forms/form-ss8-sample.pdf for a sample completed form and Here: https://www.4nannytaxes.com/NEWS/Form_W-2_Not_Received.cfm for advice if you did not get a W-2 form.

Anonymous said...

nannys and regular household help are not considered independant contractors by the IRS. Talk to an accountant. They should have been withholding for you. They can get in trouble

Yes, that Cristi said...

it depends on your contract as well, did you contract to be paid on the books? If so, then you SHOULD get your taxes from them. If there was not a written agreement, (verbal or implied will not count) then you are responsible for the taxes. The truth is that the taxes that your other family withheld were, well, withheld from your wages. YOU are soley responsible for paying taxes, you cannot (as far as I know) hold the first family liable AT ALL for this money, especially if you have no contract or pay stubbs that show that withholding. Sorry babe, you are screwed...you are gonna have to pay this yourself. It happened to me..so yeah i know. Luckily for me, I had withholding from the other job that covered the amount I owed from the first one. Good Luck!! I hope you figure this out!!

Anonymous said...

She is not an independant contractor. Whether she is an independant contractor or she got paid on the books, she would be responsible for her taxes. The only catch here is her miserable pondscum employers should now and forever be on the radar of the IRS. If you know who works for the family now and who works for them previously, great. It's just absurd to think that a family would think they could get off doing this. if they could, why wouldn't EVERYONE????

And I don't know what the person was saying about IRS loving tattles, because I know for a fact the IRS loves tattle tales and they especially love assholes who employ nannies under the table.

Why? These lowlifes are responsible for the mess America is in today.

Viva Zapato!

Helaine said...

Breedlove is a company that works with families and helps them with their tax paperwork.

From their website, I got this information for you:
You may hear the term “independent contractor” thrown around – some household employers try to claim that their worker is an independent contractor rather than an employee to avoid paying household employment taxes. Please be warned that the government has ruled on this argument and, with very, very few exceptions, classifying a household worker as an independent contractor is against the law. It is considered tax evasion and exposes those families to back taxes, penalties and interest as well as considerable legal risk. If you would like to discuss your specific case, please call us – or you can petition the IRS for a formal ruling using Form SS-8.

The url of this info is:
http://www.breedlove-online.com/tax-labor-law

I hope these awful people really get what they have coming!

Anonymous said...

Many people believe that as long as a nanny doesn't turn her employer in herself, the employer will never get caught hiring someone illegally. Recent history, and the criminal courts, are littered with people laboring under this misconception.

Often, when someone is caught, it's unintentional. Say your household employee files for unemployment, social security, disability or worker's compensation benefits. Oops! You've just gotten caught not paying her employment taxes.

Or it could be entirely intentional: your employee quits or you fire her, and she turns you in - or tries to blackmail you. Or a disgruntled neighbor reports you.

Under any of these scenarios, the result is the same: You get caught and face considerable consequences. And what are the consequences of paying illegally? They can include:

paying all back taxes, penalties and interest
charges of perjury and tax fraud
up to $250,000 in fines and up to 5 years imprisonment
ruining your reputation and career (for example, an attorney being disbarred)

Anonymous said...

Unscrupulous attorneys make the world go round.

OP said...

Thanks everyone. I always realized I'd have to pay my share of taxes, BUT, I did *not* realize they were intending to make it look like I was self employed, which means I'd have to pay a whole other slew of taxes and they could avoid paying anything. I'm going to talk to an accountant and look at the links you folks found. Thank you.

Melly Mel said...

Also when u file w/ a 1099 u have to pay a lil more to get ur taxes done. Just found this out a few days ago when my daughter got hers from a catering company she worked for. they sent her a 1099. the other company sent her a w2. we went to do her taxes and she paid more then if she would of had 2 w2 forms.

Anonymous said...

There is no room for debate on this issue. By IRS rules, you are an employee and CANNOT be classified as an independent contractor. Your employer needs to have paid their share of employer taxes (approx 10% above gross pay); and you need to have paid your share (approx 20% taken out of your gross pay).

This link is a brief description:
http://www.4nannytaxes.com/faq/NannyIndependentContractor.cfm

This is a link to the IRS rules which are complicated and a pain to read, but clarify this without a doubt. It is the Household Employer's Tax Guide:
http://www.4nannytaxes.com/FORMS/p926.pdf

Here is another link to the same that might be more readable:
http://www.irs.gov/publications/p926/index.html

Sorry this situation sucks for you. You will probably owe $1500-$2000 and Employer A will owe around $1000 in taxes (and possible penalty).

Anonymous said...

I haven't even read the others in my haste to reply to this...

YOU ARE NOT AN INDEPENDENT CONTRACTOR!!! whew. Whoa same thing happened to me. I worked overnight jobs for six months for this single mom and then she totally dropped me on the butt, literally no notice I turned up for my job and someone else was there (and she still tried to pretend she hadn't replaced me and allowed the agency to fill me in). Anyway, tax time comes around the next month and she tries getting me to file as an IP. She hadn't even told me we would be doing taxes; when I started all assumed it would be a short type of job that wouldn't require taxes to be taken out (as most newborn overnight jobs are!) but it ended up lasting much longer. Anyways, she tried to screw me. I got in contact with Breedlove and Associates, a household employeed company working out of my city but I think they provide services for anyone country-wide. I told them the deal and they informed me what I told you- nannies are NOT independent contractors, we are HOUSEHOLD EMPLOYEES.

Esentially this woman (and your former boss as well, it would seem)
was trying to screw me by getting me to basically pay both of our taxes for the work arrangement we had; as an IC you pay BOTH employee and EMPLOYER taxes!!! I informed her that I had spoken about nanny taxes with a company that specialized in that area and what they told me and "I will fill out the appropriate form and mail it to you asap." I received a very huffy, formal, business-toney reply about this being looked into and I may be contacted by her accountant (insert professional name here) to discuss further."

Whatever, sorry you are dealing with that. Because of her not witholding taxes to begin with I ended up OWING money when I did my return but at least I didn't have to pay nearly as much as I would have had she tricked me into filing as an independent contractor!!

Anonymous said...

flee to Mexico

Anonymous said...

haha, very funny

Anonymous said...

^^^^^^
sarcasm

MissDee said...

No, you are not independent contractor. You are, as defined by the IRS, a household employee, and should be treated as such, having the necessary taxes deducted from your paycheck. Having your taxes done for you enables you to do may things, such as apply for loans, lines of credit, and file for worker's comp, should you get hurt while on duty. Not doing this tax thing doesn't look good for you and for your credit history.

When I moved back from Milwaukee to Madison, I applied for a nanny job at the end of my first week here. I brought up the tax subject and the Breedlove company, and this was met with the answer, "we have someone to do your taxes". I politely told them that Breedlove was the best in the business, that I would rather have Breedlove do them, since they were experienced. I didn't get the job, and looking back on it, I'm glad I didn't, since the look on the mother's face when I brought up the subject of taxes looked like she didn't plan on pay any, and that she also didn't know much about hiring a nanny. I've had a few offers where the family wanted to pay in cash, and if I remember, the INA newsletter published something last year about red flags for agencies and nannies, and one of them being a family paying in cash and the other one not taking out taxes. It seems like talking taxes as a nanny to a potiental employer is a subject that is hard to talk about.

Anonymous said...

How I WISH most nannies can talk about taxes when we were interviewing. I can't tell you how many times we went through the following discussion "the salary we offer is $x, we pay our employer's taxes which is over and above that amount and you have a responsibility to pay your taxes. If you want, we will withold for you, and give you a statement what taxes were paid with each paycheck. If you prefer us not to withold for you, we will give you a statement along with your paycheck showing what taxes you need to pay. I don't know your particular tax situation, so it may vary a bit, but if you are single, filing as head of household, you can expect to net $x after taxes." The response we got from most applicants was "just pay me the $x in cash ($x = the total gross salary) and I will take care of the rest--that's how I usually work." or, "I don't understand, if the job pays $x (the gross salary), it pays $x and it's up to you to pay all the taxes". BTW, the salary I was offering was very generous based on numbers I've seen here, so it was not like the gross number should have been interpreted as net and we were very clear it was gross, but once we said the groww number the applicants seemed to latch onto that. We eventually got to the point where we no longer mentioned the gross salary and just said "we pay $x net salary after taxes." Nanny is the only job I've come across where you have to talk in estimated take home, not gross salary terms, like paying taxes is optional.

Anonymous said...

Dear anonymous at 10:26,

I am surprised that this surprises you. It doesn't surprise me. Most of the people working as "nannies" don't understand because they can't get other jobs. So gross and net are unfamiliar terms. They are not familiar with a paycheck stub showing the various things that are taken out, and other details, etc.

Simply because you are paying a generous pay as you describe does not mean you are getting a high caliber person. You apparently were not.

Anonymous said...

wrong wrong wrong
to yet another anonymous @1:11

The only reason you have to talk in those terms to a nanny is because every flo, mary and marva is making 12-15 dollars cash on the books. And they are ILLEGAL. So be damn sure, if you get an American born and bred to walk in your door and talk to you about your nanny position, she is going to want to make sure she makes more than the bench nannies in park slope. most of the american nannies I know- Black; but not of Caribbean descent and white have college degrees. Sometimes those degrees are in early childhood education or child psychology, sometimes it's like a math degree. The difference between an American bred nanny and a Caribbean nanny (who are not usually educated past the 7th grade) is kind of like comparing lima beans to guava trees.

Hire American!
And when you stop hiring all of these illegals, the nanny salaries will go down across the board!

(except for top tier nannies who will always be in demand)

tina v said...

^^^^^^^^
I wrote that- I am never anonymous!

^^^^^^^^^^

Anonymous said...

Tina--I only interviewed citizens with a minimum high school diploma with experience and/or some college in a child/education related field. That's why I found the discussion so surprising.
-10:26

mom said...

You don't say whether you worked part time or full time for family A. Is there any way they could be claiming you as a part time babysitter in order to justify the Independent Contractor status...or doesn't it make any kind of difference for nannies? I know that for housekeepers there are a very strict set of guidlines that separate household employee from independent contractor.

To clear up a couple of misconceptions about the IRS. Coincidentally, I was there as my son quizzed my father on Monday about the workings of the IRS. My father started his legal career as an IRS attorney and later switched to a private tax law practice and worked against the IRS for decades...so he has plenty of experience being "one of them," and also being against them.

My son asked if the IRS is really made up of a bunch of hateful jerks who take pleasure in dogging people endlessly and making their lives miserable. MY father's answer was that the IRS is a HUGE entity made up of literally thousands of people...and that the employees have a great deal of autonomy. So, it all really depends on which agent you have on your case. My dad said there are plenty of really nice IRS attorneys and employees who are willing to work with you, or work together with each other to make things as easy as possible...and they have the discretion to let you off completely, or make some sort of deal in compromise to simply finish out the matter and be done with it if they so choose and are feeling merciful. He said that, on the other hand, there are also some really jerky people who are drunk with their own power and can and do go to great lengths to make peoples lives absolutely miserable...dragging things out for years sometimes, costing the people a fortune in legal fees and practically ruining their lives in some cases, just because they can and want to. (Of course, if you are an actual "tax criminal"...purposely lying on your taxes or intentionally failing to file and hoping not to get caught, count on just about every agent to go the distance in prosecuting you. DO NOT mess with the IRS. He dealt with several cases where it had gone so far that the main objective was simply to keep the person out of prison, no matter what the cost...so always better to do your best to be on the up and up at all times. They can typically recognize an error as opposed to evasion right off the bat.)

And that hefty reward the IRS offers for turning in a tax cheat who is prosecuted? My dad saw plenty of people turned in...but has no knowledge of the reward actually ever being paid out. Not to say that it never has...but apparently the odds are not in your favor...so maybe you want to think twice about turning in your pesky brother in law for a fistful of extra cash!

Lastly, this didn't come up Monday, but I believe that the IRS, being all to happy to help you better pay them your money, has several lines that you can call for assistance, advice and information. It certainly wouldn't hurt a thing for you to give them a quick call(heheh...never quick with them...sorry to say) and discuss your predicament with an expert. The advice is free and right form the horses mouth. What could be better than that? And, letting employer A know you are dealing with them might just change her tune INSTANTLY. She may ignore your attempts at contact...but who among us doesn't shake just a little bit when we see that IRS return address on an envelope? (One that doesn't contain a check anyway!)

Anonymous said...

Miss Smarty Pants

Anonymous said...

Run Forest Run!!!!!

Anonymous said...

Ah guys, don't hate because she's smarter than you!

Kathleen Webb said...

I field this question many times in the spring. The situation is answered in detail, with links to the proper IRS forms, here:
http://www.4nannytaxes.com/NEWS/Form_W-2_Not_Received.cfm

Anonymous said...

I'm 29 and have been a nanny for a long time. Unfortunately, the IRS does consider us to be self contractors. If you didn't have the family withhold taxes from your check, then you definitely have told the IRS you are a self contractor. And you owe. Lots. The families know this and purposefully withhold this info from us. Then they say, "oooh, that's sucks for you". They've paid you in checks, claimed you as a write-off, and you are stuck paying both sides of Social Security AND self-employment taxes. Yes I know, the pay is good, but they pay so much because you are getting screwed out of insurance and are paying way too much in taxes. Thanks Uncle Sam!

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jojo bear said...

Unless nanny is planning to cook up some illegal write offs, why would she ever want to be an idependant contractor? That means she has to pay all the taxes.

Something is fishy here.